March 1, 1952 FOMC Minutes: Full Text
A meeting of the Federal Open Market Committee was held in the offices of the Board of Governors of the Federal Reserve System in Washing ton on Saturday, March 1, 1952, at 10:00 a.m. PRESENT: Mr. Martin, Chairman Mr. Sproul, Vice Chairman Mr. Bryan Mr. Earhart Mr. Evans Mr. Leach Mr. Mills Mr. Powell Mr. Robertson Mr. Szymczak Mr. Vardaman Mr. C. S. Young Mr. Carpenter, Secretary Mr. Sherman, Assistant Secretary Mr. Vest, General Counsel Mr. Thomas, Economist Mr. Rouse, Manager, System Open Market Account Mr. Thurston, Assistant to the Board of Governors Mr. Riefler, Assistant to the Chairman, Board of Governors Mr. Youngdahl, Chief, Government Finance Section, Division of Research and Statistics, Board of Governors Mr. Carpenter reported that advices of the election for a period of one year commencing March 1, 1952, of members and alternate members of the Federal Open Market Committee representing the Federal Reserve Banks had been received, that each newly elected member and alternate member had executed oath of office, and that it was the opinion of the Committee's the required received, that the following members and Counsel, on the basis of advices members were legally qualified to serve: alternate President of the Federal Reserve Bank of Allan Sproul, First Vice Presi with William F. Treiber, New York, Reserve Bank of New York, as dent of the Federal alternate member;
Hugh Leach, President of the Federal Reserve Bank of Richmond, with J. A. Erickson, President of the Federal Reserve Bank of Boston, as alternate member C. S. Young, President of the Federal Reserve Bank of Chicago, with Ray M. Gidney, President of the Federal Reserve Bank of Cleveland, as alternate member; Malcolm Bryan, President of the Federal Reserve Bank of Atlanta, with Delos C. Johns, President of the Federal Reserve Bank of St. Louis, as alternate member; C. E. Earhart, President of the Federal Reserve Bank of San Francisco, with J. N. Peyton, President of the Federal Reserve Bank of Minneapolis, as alternate member. Chairman Martin referred to section 2 of article II of the by-laws of the Federal Open Market Committee, as amended August 5, 1949, which pro vides that the Secretary of the Board of Governors of the Federal Reserve System shall be the Secretary of the Committee, stating that in order to divide the work of members of the staff at the Board of Governors more effectively, he would recommend that the by-laws of the Committee be amended first meeting on or after March 1 of each year the to provide that at its Committee shall elect a Secretary and an Assistant Secretary to serve until the first meeting on or after March 1 of the next year. He went on to say that if this change were made he would suggest that Mr. Riefler, presently of Governors, be elected Secretary to the Chairman of the Board Assistant Board of Governors, be Assistant to the that Mr. Thurston, presently and meeting on or after serve until the first Secretary, to elected Assistant March 1, 1953.
At the Chairman's request, Mr. Carpenter read drafts of changes that might be made in sections 2 and 6 of article II and section 2 of article III of the by-laws in order to carry out Chairman Martin's suggestion. The revised sections as read by Mr. Carpenter are as follows: ARTICLE II. OFFICERS Section 2. Secretary and Assistant Secretary. At its first meeting on or after March 1 of each year the Committee shall elect a Secretary and an Assistant Secretary to serve until the first meeting on or after March 1 of the next year. It shall be the duty of the Secretary to keep minutes of all meetings of the Committee and a complete record of the action taken by the Committee upon all questions of policy relating to open market operations and he shall record the votes taken in connection determination of open market policies and the under with the lying reasons assigned therefor. He shall have custody of shall perform such other duties as such minutes and records and may require. In the absence of the Secretary of the Committee the Assistant Secretary shall act as Secretary the Committee, pro tem. At any meeting the Committee Section 6. Filling Vacancies. office of Chairman, Vice Chairman, may fill any vacancy in the Economist, Associate Economist, Secretary, Assistant Secretary, General Counsel. Counsel, or Assistant General
ARTICLE III. EXECUTIVE COMMMITTEE Section 2. Secretary. The Secretary of the Federal Open Market Committee shall act as the Secretary of the Executive Committee and it shall be his duty to keep minutes of all meet ings of the Executive Committee, furnish copies thereof to the members of the Executive Committee, and perform such other duties as may be required. In the absence of the Secretary, the Assistant Secretary of the Federal Open Market Committee shall act as Secretary pro tem. Upon motion duly made and seconded, and by unanimous vote, amendments to the by-laws of the Federal Open Market Committee as set forth above were adopted, effective immediately. Thereupon, upon motions duly made and seconded, and by unanimous votes, the follow ing officers of the Federal Open Market Com mittee were elected to serve until the election of their successors at the first meeting of the after February 28, 1953, with the un Committee derstanding that in the event of the discontinuance of their official connection with the Board of Bank, as the case Governors or a Federal Reserve might be, they would cease to have any official the Federal Open Market Committees connection with Chairman Wm. McC. Martin, Jr. Vice Chairman Allan Sproul Secretary Winfield W. Riefler Assistant Secretary Elliott Thurston General Counsel George B. Vest Economist Woodlief Thomas Associate Economists Earle L. Rauber, George W. Mitchell, Charles W. Oliver P. Wheeler, Williams, and John H. Williams, Ralph A. Young
Upon motion duly made and seconded, and by unanimous vote, the Federal Reserve Bank of New York was selected to execute trans actions for the System open market account until the adjournment of the first meeting of the Committee after February 28, Mr. Sproul stated that the Board of Directors of the Federal Reserve Bank of New York had selected Mr. Rouse as Manager of the System Open Market Account, subject to the selection of the Federal Reserve Bank of New York by the Federal Open Market Committee as the Bank to execute transactions for the System account and his approval by the Federal Open Market Committee. Upon motion duly made and seconded, and by unanimous vote, the selection of Mr. Rouse as Manager of the System Open Market Account was approved. Upon motion duly made and seconded, and vote, the following were selected by unanimous to serve with the Chairman of the Federal Open Market Committee (who under the provisions of by-laws is also Chairman of the executive the committee) as members and alternate members of committee until the selection of the executive at the first meeting of the their successors Market Committee after February 28, Federal Open 1953: Alternate Members Members L. Mills, Jr. Abbot K. Vardaman, Jr. James J. L. Robertson Oliver S. Powell R. M. Evans M. S. Szymczak (To serve in the order named as alternates for Messrs. Martin, Vardaman, and Powell)
Members Alternate Member Allan Sproul C. S. Young Hugh Leach Malcolm Bryan C. E. Earhart (To serve in the order named as alternates for Messrs. Sproul and Leach) Reference was made to the resolution adopted by the Federal Open Market Committee on November 20, 1936, authorizing each Federal Re serve Bank to purchase and sell at home and abroad cable transfers and bills of exchange and bankers' acceptances payable in foreign currencies to the extent that such purchases and sales may be deemed to be necessary or feasible in connection with the establishment, maintenance, operation, increase, reduction, or discontinuance of accounts of Federal Reserve Banks in foreign countries. Mr. Sproul stated that, as had been the case for the past several years accounts were now maintained with the Bank of Canada ($17,384), the Bank of England ($10,4 ), and the Bank of France ($42.79), and that while its use would be only infrequent if at all he would recom mend that the authority be continued in its present form. Upon motion duly made and seconded, and by unanimous vote, it was agreed that no action should be taken at this time to amend or terminate the resolution of November 20, discussion of the action of the Committee on November There was a then, under which it was from time to time since 30, 1937, as renewed acquired by the Federal Reserve Bank. agreed that inasmuch as securities would be in such small amounts of claims against closed banks in settlement the standpoint of credit control, the Federal as to be unimportant from
Open Market Committee would interpose no objection to a Federal Reserve Bank holding such securities or to their sale whenever such sale was deemed advisable by the holding bank. In the discussion, it was stated that the authority had not been used for some years and that it did not seem likely that need for it would arise in the near future. It was suggested, therefore, that the authority be terminated with the understanding that if circumstances arose which made it appear that it would be useful the Committee would con sider the matter at that time, Upon motion duly made and seconded, and by unanimous vote, it was agreed that the authority granted at the meeting of November 30, 1937, should be terminated, effective im mediately. Mr. Sproul referred to the amended authority granted to the Federal Reserve Banks by the Federal Open Market Committee on October 4, 1951, with respect to repurchase agreements covering short-term Treas ury obligations with nonbank dealers in United States Government securi ties qualified to transact business with the System open market account. In response to a question from Chairman Martin, Mr. Rouse stated that the authority was useful as a supplementary market instrument and that he would recommend it be renewed on the same basis as the existing authority. Upon motion duly made and seconded, and by unanimous vote, it was agreed that no action should be taken at this time to amend the authority granted at the meeting on October 4, 1951. In a discussion of the procedure for the allocation of securi approved at the meeting of the System open market account as ties in the
Committee on March 8, 1951, it was stated that the existing procedure was working satisfactorily, that there had been no suggestions for change, and that in the absence of objections it should be continued without amendment at this time. Thereupon, upon motion duly made and seconded, and by unanimous vote, it was agreed that no change should be made at this time in the method of allocating securities as approved at the meeting of the Federal Open Market Committee on March 8, 1951. Chairman Martin then referred to the published terms on which the Federal Reserve Bank of New York transacts business with qualified dealers in United States Goverment securities for the System open market account, stating that he had no suggestions for a change in the terms at this time. Upon motion duly made and seconded, and by unanimous vote, it was agreed that no change in the statement of terms should be made at this time. In a discussion of who should receive copies of the weekly report of open market operations prepared by the Federal Reserve Bank suggested that in addition to changes made of New York, Mr. Rouse status of individuals associated by changes in the official necessary that a copy also be list be changed to provide the Committee, the with Overby who would be working Assistant Secretary of the Treasury sent to and credit matters. management and monetary the Committee on debt with
Upon motion duly made and seconded, and by unanimnus vote, the distribution of the weekly report of open market operations prepared by the Federal Reserve Bank of New York was ap proved as follows: 1. The members of the Board of Governors. 2. The Presidents of the 12 Federal Reserve Banks. 3. The Secretary, the Economist, and the Associate Economists of the Federal Open Market Committee. 4. The Secretary of the Treasury. 5. The Under Secretary of the Treasury. 6. The Assistant Secretary of the Treasury working on debt management problems. 7. The Fiscal Assistant Secretary of the Treasury. 8. The Chief of the Division of Bank Opera tions of the Board of Governors. 9. The officer in charge of research at each of the Federal Reserve Banks which is not represented by its President on the Federal Open Market Committee. 10. Mr. Treiber, alternate member of the Federal Open Market Committee; the Assistant Vice President of the Federal Reserve Bank of New York working under the Manager of the System Account; the Manager of the Securities Department of the New York Bank; the Vice President in Charge, and the Manager of the Research Department of the New York Bank; and the confidential files of the New York Bank as agent for the Federal Open Market Committee. Mr. Carpenter referred to the action taken at the meeting Committee on March 1-2, 1951, authorizing of the Federal Open Market a Federal Reserve Bank as of the Committee to appoint the Chairman case the Federal Re account temporarily in to operate the System agent stated that the to function. He New York was unable serve Bank of
authorization was given for possible use in the event of a bombing disaster and that it would appear desirable to continue it. Upon motion duly made and seconded, and by unanimous vote, it was agreed that there should be no change in the authorization given to the Chairman by the action taken at the meeting of the Committee on March 1-2, 1951. Chairman Martin referred to the action at the meeting of the Federal Open Market Committee yesterday, in which it was agreed that the Secretary of the Treasury should be advised that the Federal Open Market Committee, after considering the memorandum on Government Financing in 1952, agreed that the use of a marketable security would be preferable to a nonmarketable issue in long-term Treasury financing operations later this year. At that meeting it was also agreed unanimously that (1) the question of recommendations to be made to the Treasury concerning the ob taining of new money later this spring and other matters relating to Treas ury financing be left to the executive committee and (2) that no change should be made in the Committee's current policy of neutrality in the market under which market forces of supply and demand are permitted to have their effect with a minimum of System intervention except to the extent necessary to promote orderly market conditions. Upon motion duly made and seconded, and vote, these actions of the Com by unanimous mittee were reaffirmed and approved. be issued to the ex general direction to With respect to the the prospect that in view of Rouse stated that, committee, Mr. ecutive
the Treasury might wish to sell short-term securities direct to the Fed eral Reserve Banks in an amount approximating $1.25 billion in order to smooth the effect of tax collections on the reserve position of banks over the March tax payment period, he would recommend that the limitation con tained in the second paragraph of the direction relating to purchases direct from the Treasury of special short-term securities for the tempo rary accommodation of the Treasury be increased from the present figure of $1 billion to $2 billion. Thereupon, upon motion duly made and seconded, the following direction to the executive committee was approved unani mously with the understanding that the limitation contained in the direction would include commitments for the System open market account: The executive committee is directed, until otherwise di rected by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement), as may be necessary, in the light of current and prospective economic conditions and the general credit situation of the country, with a view to exer cising restraint upon inflationary developments, to maintaining orderly conditions in the Government security market, to relating the supply of funds in the market to the needs of commerce and business, and to the practical administration of the account; provided that the aggregate amount of securities held in the account at the close of this date other than special short-term certificates of indebtedness purchased from time to time for the accommodation of the Treasury shall not be increased temporary or decreased by more than $2,000,000,000. The executive committee is further directed, until other wise directed by the Federal Open Market Committee, to arrange the System open market account direct for the purchase for from the Treasury of such amounts of special short-term certifi cates of indebtedness as may be necessary from time to time for
the temporary accomodation of the Treasury; provided that the total amount of such certificates held in the account at any one time shall not exceed $2,000,000,000. In a discussion of a date for the next meeting of the Committee, it was tentatively agreed that it should be held during the week of June 16, 1952, at which time it was expected that there would also be a meeting and of the Board of Trustees of the Retire of the Presidents' Conference ment System of the Federal Reserve Banks. Thereupon the meeting adjourned. Secretary.
Also: Record of Policy Actions·Minutes of the Executive Committee, March 1, 1952